Burns Philp to cash out Goodman

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FOOD company Burns Philp may have a war chest of up to $4.5
billion for acquisitions after it refloats Goodman Fielder on the
stock exchange and pays off outstanding debts, analysts say.

Burns Philp is expected to keep a 20-30 per cent stake in
Goodman Fielder, which will be listed on both the Australian and
New Zealand exchanges and is expected to be valued at up to $2.7
billion.

Since the announcement last Thursday of the planned float, Burns
Philp's share price has lifted 5 per cent to a seven-year high of
$1.135 on Monday, before dropping 2.5¢ to finish trading
yesterday at $1.11.

"The transactions effectively give Burns Philp up to $4.5
billion of acquisitive firepower," said ABN Amro analyst David
Cooke.

Goodman Fielder disappeared from the Australian Stock Exchange
when New Zealand billionaire Graeme Hart bought it for $2.25
billion and took it private in 2003. Mr Hart owns about 57 per cent
of Burns Philp and is believed to need extra cash to fund his
recent purchase of New Zealand's biggest timber company, Carter
Holt Harvey, for $2.3 billion.

The new Goodman Fielder will unite Burns Philp's existing bread,
oil and spreads divisions  which accounted for 78 per cent of
the company's $2.3 billion sales and contributed $190 million of
pre-tax profit in the last financial year  with Mr Hart's New
Zealand Dairy Foods. ABN Amro has valued Goodman Fielder at up to
$2.78 billion  $2.4 billion for the Burns Philp units and
$384 million for NZ Dairy Foods.

ABN Amro has placed a target price of $1.30 on Burns Philp
shares but suggests they could even rise as high as $1.50.

Burns Philp chief executive Tom Degnan has admitted to the
possibility of a buying spree in Australia, New Zealand and the US
with the money raised.

"History would suggest (the company) will look for the next
acquisition, and then leverage up rather than return the cash to
shareholders," said Andrew Kovacs of Macquarie Research Equities.
"Hart has proven himself apt at trading businesses, so the market
may back him to continue this form."

The decision by Burns Philp to retain its snack food divisions,
which include Uncle Tobys and Le Snack, is seen by the market as a
sign that a willing buyer has already been found for the snack food
business.

"Trade feedback suggests that Nestle and/or Arnotts could be
potential buyers," said Mr Kovacs. "This bolt-on acquisition would
certainly make sense to both of these players."

A spokeswoman for Nestle declined to comment on any potential
bid, while Arnotts said they did not comment on market
speculation.

Other potential buyers such as market giants Kelloggs and
Sanitarium would face competition issues if they bid for Burns
Philp.